Section 909 and Section 901
Treasury and IRS issue final and temporary regulations
Treasury and the IRS have issued final and temporary regulations providing guidance under Section 909, the foreign tax credit splitter provision enacted in August 2010 as part of the legislation commonly referred to as the Education, Jobs and Medicaid Assistance Act. The Section 909 regulations follow and build on Notice 2010-92, which was issued on December 6, 2010, and which primarily addressed the application of Section 909 to foreign income taxes paid or accrued in tax years beginning on or before December 31, 2010. Of significant importance, the regulations maintain the approach of the Notice by providing an exclusive list of splitter arrangements, but expand upon that list.
Generally, the new list of splitter arrangements will be effective for foreign income taxes paid or accrued in tax years beginning on or after January 1, 2012. However, the regulations provide that foreign income taxes paid or accrued by any person in a tax year beginning on or after January 1, 2011 and before January 1, 2012, in connection with a splitter arrangement as identified in the Notice, are treated as splitter arrangements.
Treasury and the IRS also issued final Section 901 regulations providing guidance for determining who is considered to pay a foreign income tax for purposes of the foreign tax credit. The Section 901 regulations provide rules for identifying the person with legal liability to pay the foreign income tax in some circumstances. The final regulations are generally effective for foreign taxes paid or accrued in tax years beginning after the date of publication in the Federal Register, subject to a taxpayer election to apply the combined income rules retroactively.
Please join us for a 90-minute webcast on Friday, 17 February at 11:00 a.m. EST as Ernst & Young LLP professionals provide an in-depth analysis of the regulations, as well as their insights on immediate actions needed with respect to these changes.
Peg O'Connor, Ernst & Young LLP, International Tax Services
Barbara Angus, Ernst & Young LLP, International Tax Services
John Morris, Ernst & Young LLP, International Tax Services
Marjorie Rollinson, Ernst & Young LLP, International Tax Services